Foreclosure Purchase - Unpaid Taxes

Foreclosure Purchase - Unpaid Taxes

Member since 2019 · 17 posts · 9 votes

Recently I was the high bidder on a foreclosure at sheriff's auction in MN and I currently hold the sheriff's certificate for the property.  This is my first sheriff's auction and there were property taxes that were unpaid plus a small penalty.  

Questions: Should I pay the property taxes that are currently past due?  Or should I wait until the redemption is up to see if I end up with the property causing the taxes to potentially be delinquent with the county + more penalty?  Would the homeowner be required to pay those taxes back to me if they redeem?

The redemption runs into 2021.  From what I understand in Minnesota, if they go past the current year when they were due (2020), they will be considered delinquent and the county could impose a tax lien on the property where there currently is not one.  In the event that the homeowner redeems, my understanding is that I can charge the original mortgage interest rate + reasonable attorney fees + property taxes I paid for the homeowner + necessary expenses to keep the home from declining?  

Am I correct in assuming that I can charge the property taxes that I would pay on their behalf back to them in the event that they redeem?  If anyone has some experience in this area or specifically with this in MN, I would love some feedback.  My thought is that I should pay them to avoid additional penalties/problems and I am hoping that they would legally be required to repay them to me as part of a redemption total.  

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Bob NortonPro Member
Accountant · Slidell, LA · Member since 2019 · 382 posts · 272 votes
5y

@Ron S. Interesting. No wonder so many states are in financial trouble.

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  • Realtor · Bloomington MN (bloomington, mn) · Member since 2016 · 451 posts · 263 votes
    5y

    @Kurt Kleespies if I am reading your post correctly, you purchased a foreclosure property that is also behind on taxes (which would be expected as they weren’t paying their mortgage). If I am reading that right, that means you are now the legal owner and any taxes or fines on that property is your responsibility. If you do not pay them they will sell your property for not paying your taxes.

  • Bob NortonPro Member
    Accountant · Slidell, LA · Member since 2019 · 382 posts · 272 votes
    5y

    @Kurt Kleespies @Daniel Anshus Check with the county tax office.  Typically in a foreclosure the liens, including taxes, are paid off in order.  Since property tax liens are typically first in line, they would have been paid off by the sheriff after you purchased the property.

  • Realtor · Bloomington MN (bloomington, mn) · Member since 2016 · 451 posts · 263 votes
    5y

    @Bob Norton is correct. I misspoke completely. This is why I shouldn’t go on BP on my phone! You should be responsible for taxes after purchase. 

  • Member since 2019 · 17 posts · 9 votes
    5y

    Thanks for the reply. I agree that would be a normal situation where the property could get a tax lien and foreclosed on if not paid.  It is a slightly different situation though because I only hold the sheriff certificate at this point for a year because the homeowner has a one-year redemption due to such a small remaining balance of their original loan amount per MN foreclosure law.  The mortgage company paid the 1st half of 2020 but they did not pay the second half that was due on 10/15/20 and the auction was on 11/5/20.  I think the chances of redemption are quite high so it is a 50/50 shot on whether I will become the final owner.   My question was really whether those past due property taxes will be required to be paid back to me if they redeem or if I would have to fight the homeowner for repayment. From reading a little bit on the statute yesterday, it appears that they will be added to the total redemption price for the homeowner in the event that they redeem within the year.  I just didn't want to pay the property taxes and not be repaid for them if the homeowner redeemed.

    If anyone else is interested in the MN statute, you can read more about it here:  https://www.revisor.mn.gov/sta...

    If anyone else has any first hand experience in a similar situation, please let me know!  I am by no means an expert so anything that is relevant to the situation is valuable.  Thanks to those that replied!

  • Deerwood, MN · Member since 2014 · 184 posts · 122 votes
    5y

    My two cents: based on my experience it will take the county 3 years of back taxes being unpaid before the county tax forfeits the property. I think the penalty on the unpaid tax is minimal compared to the possible hassle of trying to collect from a homeowner. I wouldn’t pay the taxes. However, I don’t know much about sheriff sale property.

  • Member since 2019 · 17 posts · 9 votes
    5y

    @Dan Vleck

    Correct.....I agree that it would be quite a while before a tax lien would happen. I did go ahead and pay it because it was just a little under $500 and because I was able to find that statute that I listed above.

    I do agree that the costs/annoyance of trying to fight with the homeowner after the fact for repayment would out weigh the small penalties. Had I not found that statute, I would have followed that same method!

    Thanks!

  • Paradise, CA · Member since 2015 · 1k+ posts · 871 votes
    5y
    Originally posted by @Bob Norton:

    @Kurt Kleespies @Daniel Anshus Check with the county tax office.  Typically in a foreclosure the liens, including taxes, are paid off in order.  Since property tax liens are typically first in line, they would have been paid off by the sheriff after you purchased the property.

     That's not necessarily correct. Some states, sure, but many states have no such requirement.

  • Bob NortonPro Member
    Accountant · Slidell, LA · Member since 2019 · 382 posts · 272 votes
    5y

    @Ron S. Interesting. No wonder so many states are in financial trouble.

  • Member since 2019 · 17 posts · 9 votes
    5y

    I agree it should probably just be taken care of by the mortgage company at the foreclosure auction.  It does seem a little odd but I guess it is what it is.

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